Over the past few years, many mediums that we use on a daily basis have “gone digital”. From television to radio, adding the word “digital” immediately conveys the thought of an upgrade.
During the recent Budget, Chancellor George Osbourne announced plans for HMRC to implement a “Digital Tax Account” for individuals and SMEs. Accountants across the country have debated what this entails for their clients, and how HMRC would launch such a major overhaul of its administration. Will the DTA be an upgrade on the current system, or will it prove to be a confusing and non-effective step?
Many felt the move from paper tax returns to online filing for VAT and Self-Assessment would be too much of an administrative headache for many taxpayers and SMEs, but the move has been, for the vast majority, a positive experience.
Remember a new movement of taxpayers are coming of age. Coined “Generation Y”, these young entrepreneurs and taxpayers cannot recall a time when our lives were offline. So a Digital Tax Account is really a natural progression, rather than a futuristic and unrealistic step.
HMRC are starting to provide detail though their digital tax blog found at:-
So what do we know so far?
HMRC have stated their aim which is “to provide an innovative new account that will help people across the country manage their tax affairs more easily. The account will eventually bring all your information and a host of exciting new services together in one place, putting you in control of your own information.”
Howdto HMRC plan to do this?
They are trying to open a real time online dialogue with the taxpayer. Within this Digital Tax Account the taxpayer can:-
- Inform HMRC when their circumstances change, which helps them know that their taxes and tax credits are always up to date.
- See regular messages from HMRC informing them of deadlines and when they will need to do something.
- See immediately what happens when a taxpayer’s circumstances change and update how much tax is due when these changes happen.
- Manage payments quickly and easily online.
HMRC hope that the changes outlined for many individuals, will eventually remove the need to complete a Self-Assessment tax return at the end of the year. This seems optimistic, but time will tell if this is a realistic result.
On 2 July 2015, HMRC have set up a “BETA” system for private individuals, giving them limited access to a working DTA. This BETA account allows the individual to:-
- View personal details (name, National Insurance number, and address)
- Access a Tax Estimate Service telling you how much tax they will pay through PAYE, and allowing them to check the information their estimate is based on – replacing the old-fashioned paper P2 tax coding notice
- Access links to income tax-related online forms’ on GOV.UK
Over the coming months HMRC will add modules to the account including Self-Assessment, Tax Credits, and National Insurance services. We will keep monitoring and provide updates though this blog.
HMRC call this their “roadmap”, and by the end of March 2016 they expect to have 10 million fully functional Digital Tax Accounts ready for individuals to access. They are working to the same deadline for SMEs. For a detailed road map for both individuals and SMEs please download the flow charts from the enclosed HMRC blog post:-
We believe that if a fully accessible DTA is made available to SMEs and individuals and provides the functionality that we want for our clients, then surely it is a step in the right direction.
Our only concern is that the current system is driven by an internal need, rather than the needs of the taxpayer.
We would want a streamlined service where we as agents could look at payments for all taxes, including VAT, Corporation Tax and PAYE. An example where this would be useful is when an incorrect reference number has been used, resulting in HMRC misallocating a payment to an incorrect tax. The streamlined account would help us and the client see the data and resolve this issue more effectively, saving time in both discussions with HMRC and our clients. HMRC must see the benefits of adding this functionality to the proposed Digital Tax system.
Whether accountants as agents will have such information at their disposal; only time will tell. In the meantime, we will keep you informed of changes as and when they happen.